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The Problem With Portals
nickfarr writes: "This article about Yahoo from Sunday's NYT gives some pretty good arguments against the profitability of portals; or the idea that massive visibility translates into massive profit. It definitely presents a broad middle perspective between the .com naysayers and the irrational optimists." The financial news is full of such things, and this is better than most -- all that infrastucture is looking for some money to swallow before it starves.
Dream on, marketroid. Hate to burst your bubble, but that is exactly what all of the major ad network players do, or at least purport to do. Companies like Accrue and NetGravity made millions of dollars selling ad-tracking, targeting and reporting software to various portals (now all dead or dying) in order to ensure the delivery of that information.
Guess what? All the targeted demographic information in the world doesn't do a damn thing to change some very basic facts:
- Nobody (ie: not enough people to make it worth anybody's time in a sober business environment) was clicking on the damn ads.
- Nobody (ibid) was buying what the ads were selling.
- Most of the ads were being bought by over-capitalized dot-com startups which are now DOA. Minus that money, placement prices are finding their natural level: somewhere underneath newspaper classifieds.
Add it all up and you have Game Over for the ad banner market. For now, and for the forseeable future. And I for one will not miss it at all. Bad people, bad money, good riddance.News for Nerds. Stuff that Matters? Like hell.
It's funny. I worked at a bank that passed on the Yahoo IPO back in 199x. There was a lot of e-enthusiasm among the analysts, but it had not reached the flaming inferno of the past two years.
The primary (overlapping) criticisms of the deal at the time were:
Time seems to have confirmed these worries, and it won't be long before we hear a chorus of "I told you so" from the despised minority of doubters. Incidentally, the ability to enumerate these points did NOT save my old co from its share of internet flameouts. I guess that's why they call it a mania.
My own opinion is that the shakeout is a good thing. Most "e-tailers" are glorified catalog retailers, except that they lack basic business knowledge. Throwing people's savings at them is hardly a good thing. If other online cos that parted these fools with their money have to suffer some, that's good too. Let them shed the corporate massage parlor, or whatever other .com fat they've accumulated. Let them automate more, as computer businesses should, and return workers to the Pool of Useful People.
The worst thing is the media trying to turn this into MY problem. I can't stand it when these business issues cause people (particularly the Times) to darkly hint at the impending death of free content. Don't they think some struggling free content provider might be happy with Yahoo's "80% discounted" ad placements? Might they not benefit some from the many skilled workers returning from their mad crusades?
On a grander scale, follow the money upstream -- do they think when the tap runs dry, infrastructure and bandwidth providers will just pack up and go home? Nonsense. They'll do what the computer industry always does when faced with a glut -- increase capacity and lower costs until you find your market again. The only rational conclusion is that the removal of .com high-rollers from the marketplace is the best possible thing for the free and independent Internet.
Sorry, I should've warned about rant mode, but it took me a while to get worked up.
Kill, Tux, kill!
Yeah, and these "television" and "radio" methods of distributing content will soon die fiery deaths because they cannot force joe sixpack to make micropayment or monthly subscription in order to watch NFL football.
Don't sell your Yahoo stock yet; Net Advertising is still maturing. When sites can provide their advertisers with target demographics and an equivilant to television ratings, the current web models will work. Just give them time.
Karma: Bored. (Thinking about resurrecting the "Anyone else is an imposter" joke.)
The key to all of this is that Holy Grail of the Internet which *no one* has ever figured out: micropayments. Yahoo!, however, could actually make some money on a limited subscription model. There are a few services on Yahoo! that I'd be willing to pay for; I use them constantly. I pay $110+ for my Internet connection at home; if I needed to pay $5/month for all the services Yahoo! provides, then I'd probably be willing to do that.
In the meantime, though, banner advertising won't pay all the bills. I work for Superpages.com, and a large portion of our income is actually from selling listings to the same folks who buy yellow pages advertising. Advertising will have to get smarter and leaner if it's going to continue to be a major Internet revenue stream. It'll have to be more than that, though. Look at the folks on the Net who really are making money hand over fist: porn sites. And while there's lots of free stuff out there, yes, quite a bit of it is for-pay. The trick is to have a service worth it, whether you're selling porn, yellow pages listings, or My Yahoo!.
No, the Net will never become completely pay-as-you-go, thank goodness. But we're all going to have to learn a lesson we should have learned a long time ago: TANSTAAFL.
"You can never have too many elephants on your team."
Amongst all the major operators, Yahoo has been the very essence of interoperability. Not once (er, that I'm aware of) has it locked anyone in, required a platform, used Javascript or even frames, etc. They led the boom and were the only ones to understand how important load times are.
Just go to boo.com, the failed sports closing retailer. Millions of dollars were invested in this website, yet I get a blank page unless I turn on JavaScript. And if I turn on JavaScript, the code on the page proceeds to maximise my browser window in such a way that if I were a newbie, I wouldn't be able to access the close button for my browser. The people who made these dot.coms were for the mostpart tricksters and conmen, and they fully deserved the dot.com bust. For all our sakes, don't let them reflect on our great 'Net community.
Largo's "Monetize" rant today at MegaTokyo.com on why portals (and ad networks) suck.
to quote:
Karma: Bored. (Thinking about resurrecting the "Anyone else is an imposter" joke.)
If they stayed in the web directory business which started them off (and which is something they are good at) they may not have needed to hire 10,000 people or have huge overhead operating costs, while they would still get much of the traffic and advertisement revenue they do now.
I think it's their greed that got them into the current mess. Low overhead high traffic sites is the way it should to go. How long would "Slashdot free internet" service last i wonder? Stick to what you know.
Ñ'
The people who made these dot.coms were for the mostpart tricksters and conmen[...]
Don't attribute to malice what can easily be blamed on stupidity.
--
Feminism is the wild notion that women are human beings.
"At some point, if content on the Internet isn't worth paying for," Mr. Kenney said, "it is going to have trouble surviving."
I just adore this point of view, and encourage Mr. Kenney and his ilk to get out now, while the getting's good. Don't let the door....
Eva Schindler-Rainman, one of the people I admire inordinately for her work on voluntarism, and who I got to meet, said "if you need money, money is always available. Worry about making a good case, and you can find the money."
Maybe some of today's ad-subsidized websites will be tomorrow's foundation-subsidized websites. Maybe there'll be government grants (I'm surprised the UK hasn't already gone for this) that reward people for putting up information and supporting dialogue.
And while there are funding sources that love to do pilot projects and move on, other sources (a bit harder to find, but they're there) are interested in sustaining existing efforts past the pilot project stage.
People think that an order of magnitude decrease in the cash that's going into the net would be disastrous. I think that's nonsense. If we don't have Wal-Mart on the Web any more, exactly what do we lose?
Net savvy users just don't use many portals. Right now the only thing that portals offer most users is e-mail. Chat rooms, news services and search engines? There are many better places than yahoo.com and the like, to get these things.
The real reason portal sites die, is that there useless. Everyone loves simple specific information and news pages, lets say a page on electric cars. However when a portal gobbles it up for their, "electric car", section, they break everything to make it fit into their own arcatexture, and in the end aliante their origonal audience by being overbearing, and often demanding a login to use.
The worst part is portals keep on gobbling up smaller services. Geocities used to have a pretty good free webhosting service, then yahoo gobbled it up. Hotmail was the defacto web based e-mail page. Untill MSN gobbled it up (and unsucsessfully tried to move it over to NT i might add). Now? Hotmail is crap. Yahoo's e-mail service, and even the home grown web-mail services many universities offer their students, beat it out hands down. Why did it happen? Because MSN demanded that hotmail fit into their own portal structure, and work with every little trinket and gadget built into their portal.
Lets face it, net savy users use very little to none of a portals services, because thats the only part of them that are ever good.
You are only young once, but you can stay immature indefinitely.
In January, Yahoo slipped from second to third in the monthly ratings by Media Metrix, a research concern that tracks the popularity of Web sites in the United States, behind AOL Time Warner and Microsoft's MSN.
However, both these companies have the advantage of owning the top two browsers, which when loaded default to the respective companies' portals.
Yahoo has no such way to leverage its content into people's browsers. Thus, I would say that Yahoo is still winning, based on the fact that everyone that sees the front page actually wants to be there.
Also, when you look at different portals (how the hell do you define "portal", anyway?), Yahoo is the only one that still focuses it "main page" on the search engine.
Karma: Bored. (Thinking about resurrecting the "Anyone else is an imposter" joke.)
Yahoo and other portals have tried to follow suit, doing all things for all potential users, and in the process spending lavisly to acquire niche competitors.
But Yahoo doesn't have a lock on Web users the way Microsoft does with Office for desktop users. You can't just click a link to use Word Perfect rather than Word. But you certainly can leave Yahoo to use another site.
Sites that stay focused on what they do well tend to survive. It's the UNIX mantra - small, sharp tools that get the job done. I was a religious eGroups user until they got swallowed by Yahoo. Now the interface sucks and I'll probably start looking for a replacement.
Portals by definition are not lean and mean. You might even say that they are counter to the spirit of the Web. Things are *supposed* to be distributed, and users of the Web understand this better than all the industry pundits. They also have shown again and again that brand loyalty on the Web doesn't amount to squat.
Read the EFF's Fair Use FAQ
Allow me to quote...
"A banner is nothing more than a highway billboard, a reminder message," said Richard V. Hopple, a former ad agency executive and now chief executive of Unicast, an advertising technology firm. "We know what outdoor is worth ? $2 per thousand."
Has anyone noticed the context of web ads suck? When I read an interesting/daring/important article/story I try to click on the banner add to make the author some money. Somtimes, even though the article is blatently for geeky type people the add is for somthing totally uninteresting to geeks. To examine the opposing situation, has anyone noticed the coolness of the ThinkGeek Ads here?
So what is the going rate for banner adds? And how much is context taken into account. It seems to me Ebay will get more clicks because people there are in the mood to shop. People at Yahoo are their to check their stock or the game or the weather, not to buy a couch.
It's gotta be more than 2 dollars per thousand, but how much more?
Novel theory: Modern Man evolved from psychopath
Do these banner ads _really_ have smaller return on investment than many forms of "conventional" advertising, or is it simply that their ROI is easier to measure in the internet world?
"Extremism in defense of liberty is more fun."